More young people are turning to social media rather than their bank for financial guidance, according to new research from Deloitte.

Key Findings:

• 25% of 18-24 year old banking customers use social media for financial guidance;

• One in five (20%) of this age group have invested money based on social media recommendations;

• Yet, 33% of this age group are not confident in their financial knowledge to take out investment products.

The survey of over 2,500 UK consumers, conducted in August 2023, found that 25% of 18-24 year olds use social media when searching for financial guidance and advice. It also found that 20% of this age group have invested money based on social media recommendations, with almost half of these (48%) having invested between £100-£500 and 16% invested over £1000, in their lifetime. 21% invested specifically in cryptocurrency based on social media guidance. Yet, 33% of the same age group are not confident enough in their financial knowledge to take out investment products at all.

Alternative Sources Of Financial Advice

The survey - which aims to understand the impact of the rise in the cost of living on banking and insurance customers - reveals that the majority of consumers across all age groups are turning to alternative sources for financial guidance and advice. Only 16% of respondents in the banking survey said they would seek guidance from their bank, with respondents preferring to seek it elsewhere, such as from their friends and family (34%) and the MoneySavingExpert (25%). The main reasons cited for this was that they were either unsure of what supportive services their bank has to offer, or too embarrassed to seek out support.

Margaret Doyle, chief insights officer, financial services at Deloitte, said: “It is troubling that, instead of reaching out to trusted providers, many people are turning instead to what is often unregulated financial and investment advice from ‘finfluencers’ on social media."

“With the rise of technologies like deep fakes, relying on social media for advice makes people vulnerable to scams, phishing, and risky financial decisions. There is financial education and support available from government agencies, banks, insurers, investment managers and charities.”

Impact Of The Rising Cost Of Living

Amid high interest rates, almost six in ten (58%) total respondents have relied on their credit card or overdraft to pay for their monthly expenses over the past 12 months. Younger consumers have been particularly reliant, with 82% of 18-24 year olds using credit cards or overdrafts to pay for monthly expenses, and 35% having missed or been unable to pay regular scheduled payments more than once in the last 12 months. Younger customers are also more likely (23%) to use ‘buy now, pay later’ schemes.

Almost half (47%) of total respondents held a mortgage or loan at the time of the survey, and more than three quarters (76%) have relied on their credit card or overdrafts to pay for their monthly expenses more than once over the last 12 months. Just under half (47%) of mortgage and loan customers are also unsure of what support their bank has to offer.

Richard Kibble, head of banking at Deloitte, commented: “UK consumers are facing the highest inflation in 40 years. To cope, they are making short-term choices that could negatively impact their longer-term financial security. Advice across the sector needs to move beyond products to look more holistically at financial health and achieving this will require a broader review of how customers are informed and advised. Enhanced support from the industry, regulators and government is required to protect customers longer-term interests.”

Effects On Insurance Products

Rising insurance premiums have also seen consumers cutback on insurance products. Around a third (31%) cancelled or paused products in the last 12 months due to financial pressure. Life insurance was the most commonly cancelled product (8%), followed by mobile (7%) and pet insurance (7%). Motor, buildings, and contents insurance however have been more resilient since they are a requirement for motorists and mortgage payers. With a reduction in disposable income, 30% of insurance customers have also opted to reduce their pension contributions.

39% of insurance customers did not receive any practical guidance in situations when their financial circumstances have changed. Like banking customers, insurance customers are now also opting to seek support from a significant number of other sources before contacting their insurer, including 15% resorting to social media.

Andy Masters, head of insurance at Deloitte, said: “Reducing pension contributions and cancelling insurance products may seem like a solution in the short-term, but individuals will need support to understand how they can recoup these losses to avoid significant impact longer-term."

“Insurance providers and banks need to encourage customers to engage with them – customers aren’t always aware of what’s available and don’t necessarily reach out to their provider for support.”